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Many North East residents are still facing a daily struggle with debt despite the UK’s gradual economic recovery and a fall in the number of people seeking advice, a leading debt charity has warned.
Figures released today by StepChange Debt Charity show that 4348 people in the North East area called its helpline for advice in the first half of 2015.
The release of the figures coincide with StepChange's new report, Navigating the New Normal, which shows that more than 1 in 5 Britons are currently showing at least one sign of financial difficulty and 2.6m of them are in severe problem debt. Of those 2.6m, 73% suffered at least one ‘income shock’ in the last year, such as job loss or a reduction in hours.
The charity says that people on low and middle incomes are particularly at risk after an income shock, with the combination of having little to no savings and an unresponsive welfare system leaving them unable to meet their basic costs. Shocks to their income often see them turn to credit to cope, which makes them 20 times more likely to fall into problem debt.
The report comes after the latest Bank of England figures showed the highest annual increase in borrowing on credit cards and personal loans for nine years, sparking fears of a return towards the high levels of unmanageable credit seen in the lead-up to the financial crisis.
Everyone faces ups and downs in life, but more than 11m people in Britain are now experiencing some financial difficulty and a quarter of those are in severe problem debt. North East is no exception and although the economy is beginning to recover, millions of households remain vulnerable to shocks to their income over the next year and many could find they have no alternative but to turn to credit to cope, which can quickly make the problem much worse. Debt can have a devastating effect on people’s lives, including sleepless nights, anxiety and mental and physical health problems with knock-on effects for their families. We would urge anyone who is experiencing debt problems to call us for free, impartial debt advice and take that first step as early as they possibly can.
The money-lending firm Wonga, the current shirt sponsors of Newcastle FC, has agreed to write off the debts of more than three hundred thousand customers. It follows a review from the financial watchdog which requires the firm to make significant and immediate changes to its business. The decision means that 330, 000 people who are currently in 30 days of arrears with Wonga which have the balance of their loan written off and will owe the company nothing.
Meanwhile, around 45,000 customers who are up to 29 days in arrears will be asked to repay their debt without interest and charges and will be given an option of paying off their debt over an extended period of four months.
Wonga's new chairman has spoken about the move, confirming that it comes following concerns from the Financial Conduct Authority.
"We want to ensure we only lend to those who can reasonably afford the loan in question and during my review, it became clear to me that this has unfortunately not always been the case. I agreed with the concerns expressed by the FCA and as a consequence of our discussions we have committed to taking these actions."
The Department for Business has issued a statement after the release of a report today that concluded that the number of people relying on quick, high interest loans is rising.
The Government is currently looking at whether any action needs to be taken to address the problem, and about what action it might take.
Read the full statement from them below:
"The Government is concerned about problems in the high cost credit sector and is determined to address these, particularly for the most vulnerable people.
"The Office of Fair Trading have been conducting a compliance review of the payday sector and are due to issue their final report shortly. We strongly support any enforcement action they take forward and the steps they will take to improve standards across the sector."
"Our intention is for the new Financial Conduct Authority to be given responsibility fo regulating consumer credit from 2014. This new regulator will have a diverse range of powers to address problems across all consumer credit markets.
"The Government is currently considering whether other action may be needed in the high cost credit sector."
The number of people relying on quick, high interest loans is rising. The Centre for Responsible Credit says companies should share information about customers who are already in debt. The change would protect low income borrowers from irresponsible lenders.
Kath Simms and Kath Carter, both from Stockton, have stuggled with loans for years. They told ITV how easy it is to fall into financial ruin.
Two Stockton mothers are warning others of the risks of taking out taking out high-interest loans. They say vulnerable people are being targeted by companies who knock on people's doors and are becoming 'the norm' and 'a credit line' for those who find it difficult to live within their means.
Teesside debt charity Thrive supports hundreds of people with cash problems.
Community organiser Greg Brown says, “We try to advise people on alternatives to high interest loans. We encourage people to stick up for themselves, challenge lenders and get what they are entitled to. We know what rights people have and help send people on the right way.”
Investigation by ITV Tyne Tees uncovers a vicious circle leaving huge numbers of people in debt & councils millions of pounds out of pocketRead the full story ›
Freedom of Information requests were sent to almost every council in the region. Some were unable to provide exact figures. The full breakdown of council tax arrears from North East councils who responded to our Freedom of Information requests is listed below:
- Durham County Council: £23,320,942
- Newcastle City Council: £15,673,796
- Darlington Borough Council: £4,179, 119
- Sunderland City Council: £9,500,000
- Gateshead Borough Council: £7,025,726
- Northumberland County Council: £12,994,114